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A credit score has a big impact on the amount of money an individual spends. With a low credit score number, they pay more interest for credit cards, home loans, other debt and for insurance. With a high score, they can save substantially on all types of debt. Consumers can also have a big impact on their score by following a few tips to raise it to a level that will make them look good to lenders.

Simple Ways to Improve your Credit Score

What is a Credit Report and Score

The credit report is the record of a consumer’s debt. The score is derived from this. Credit scores are the way a lender, such as a bank, a landlord or an insurance company evaluates a borrower. The number gives the lender an idea of how responsible the borrower is for repaying debt. This is important for lenders because the payments are the source of their profit. The numbers range between 300 and 850, and anything above 710 is considered good. With a score above 750, the consumer will be eligible for the lowest interest rate on the market.

Can the Score be Improved

Credit scores cannot be raised overnight, but there are a few simple things consumers can do to raise them a little within six months if there is no foreclosure or bankruptcy on the report. First, the consumer should get a copy of his or her credit report. There are three major credit bureaus (Equifax, Experian and TransUnion) that will give a free report annually to an individual who requests it. Credit reports change throughout the year as lenders report updated credit information. To get the actual score number, a fee will be required.

The report should be examined for errors. If any are found, the lender and the credit bureau must correct the errors. This alone could raise the score. Consumers can also start paying bills on time. Paying bills late will lower the score. One way to ensure that bills are paid on time is to arrange automatic withdrawal from a bank account to make payments. Once payments are made on time, the score will start to go up, and the fact that payments were late in the past will no longer be an issue.

Tips for Raising the Score

Credit card debt is a major factor in low credit scores. If the credit card debt ratio goes beyond 10 percent, the credit number will go down. For example, if the card has a spending limit of $5,000, the unpaid balance should not go over $500. Consumers could ask their lenders to increase their spending limit, which would increase their score, but if they do this, they should not use those cards.

Student loans and car loans do not affect the credit scores much. To reduce the score, consumers should pay off credit card debt and keep up to date with the other loans by making minimum payments.

Credit scores are also based on credit history. The older it is, the better the score. This is why old credit cards should not be cancelled. A small amount can be charged on these cards and paid off each month.

If it is possible, getting a loan from a family member or friend and paying off credit card debt will give a big boost to the credit score. It doesn’t actually remove debt because the loan still needs to be repaid, but the debt will not go on the credit report.

If the consumer needs to apply for a loan, they should get the loan as quickly as possible. Loan applications should be given to lenders within a two-week period. Several loan applications will decrease the score, but a loan application or two within a short period will not be seen unfavorably.

Making payments on a credit card will help raise the score. Department store and gas company cards are easier to get. They should be paid off each month.

If it becomes too difficult to pay monthly expenses and pay down debt, consumers can contact a legitimate credit counselor. It may take a bit longer to raise the score, but the counselor will talk to credit card companies and other lenders and try to get the interest or monthly payments reduced. Seeking assistance will not hurt credit scores.